How case law has helped shape the banking union – 10 years on

When discussing the creation and development of the banking union, an important actor has often been ignored – the courts.  However, the General Court and the Court of Justice of the EU have made several important decisions over the past 10 years. In a recent paper for the ECON committee of the European Parliament, we discuss some of the most relevant cases and their implications for development of the banking union.

The paper examines key aspects of Banking Union Law and EU courts interpretation concerning SSM and SRM governance, the institutional framework, the application of national law by the European Central Bank (ECB), the boundaries of decision-making and the scope of judicial review. It also highlights certain gaps and shortcoming in the current legal frameworks.

In particular, the cases concerning the SSM address the exclusive competence of the ECB for prudential supervision: (1) in determining whether an institution is significant or less significant; (2) in supervising both significant and less significant institutions; and (3) in leading common supervisory procedures, once again regardless of their significance. The EU courts have affirmed the exclusive competence of the ECB in prudential supervision of both significant institutions and less significant institutions in granting and withdrawing licences, and qualifying holding procedures in several instances.

Turning from supervision to resolution, determination of the Single Resolution Fund (SRF) ex-ante contributions has given rise to extensive litigation. Several banks have challenged the decisions of the Single Resolution Board (SRB) on these contributions with relative success. The General Court has annulled several of these decisions, particularly those adopted for 2017, 2021 and 2022 SRF ex ante contributions, mostly on procedural rather than material grounds.

A recent case (C-551/22 P Commission v SRB) seems to revive the Meroni doctrine, which constrains the delegation of powers and discretion to EU agencies. This case, alongside earlier litigation on the resolution of Banco Popular Español, addressed the complexity of resolution decision-making. In particular, the courts assessed the legal nature and justiciability of acts like the ECB’s failing or likely to fail (FOLTF) assessment and the SRB’s resolution scheme, and (no) resolution decisions. Importantly, the Court of Justice determined that the European Commission, not the SRB, is the entity responsible for endorsing the resolution scheme, thus reinforcing the distinction between EU institutions and agencies.

In sum, the CJEU has followed an EU integration approach regarding the systems for banking supervision and bank resolution. However, it may have also ‘revitalised’ the Meroni doctrine by identifying the liable decision-maker to be an EU institution (the Commission) and not an EU agency (the SRB).  The important role of litigation on new laws, regulations and institutions reflects the nature of Europe’s legal system, in which (unlike Napoleon’s vision), legislators cannot always design bright-line rules and foresee all contingencies. In this regard, well-functioning judicial review in the field of the Banking Union also reinforces the accountability of European Union institutions and agencies in a key area of EU law.